As Airbnb battles cities trying to regulate it, one state joins the fight

Airbnb, the largest player in the short-term rental market, is facing pushback from governments worried about how the service is limiting tax revenues and affordable housing stock, and turning residential property into commercial enterprises with little government oversight.

Massachusetts recently became the first state to pass sweeping regulations on short-term home rentals, with a law signed by Republican Gov. Charlie Baker in late December. As is the case when local governments have passed rules for this emerging industry, Airbnb has threatened to fight the state’s legislation in court.

The law, set to take effect in July, requires short-term rentals to register with the state, carry a minimum of $1 million in insurance and pay a 5 percent tax to the state. The law also allows local municipalities to assess an additional 6 percent tax and creates a state-run affordable housing fund, which will funnel money from another 3 percent tax on property owners with two or more short-term rentals in the same municipality.

The sponsor of the Massachusetts bill, state Rep. Aaron Michlewitz, pushed for the measure after he began to see short-term rentals saturating his neighborhood in Boston’s North End.

“People were buying properties and turning those properties into short-term hotels,” Michlewitz says.

At first, he wanted to push for an outright ban on all short-term rentals in his neighborhood. “But as I have learned about it, I have grown to understand the demand and need for this type of lodging,” he says.

Massachusetts may have the first statewide short-term rental regulations, but it’s a debate that cities and states are having around the country.